Running head: MADOFF FRAUD
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The Fraud of the Century: The Case of Bernard Madoff
Renita A. Duncan
Ethics in Today’s Organizations
April 21, 2013
Ms. Deborah Mitchell
Southwestern College of Professional Studies
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What is the Ethical Issue Involved in This Case?
I would suggest that the ethical issue involved in the Berni Madoff case is that of Honesty
and Integrity on part of Bernard Madoff. In Chapter three of our text we learned that
“Stakeholders’ ethical concerns determine whether specific actions and decisions are perceived
as ethical or unethical” (Ferrell, Fraedrich, Ferrell, 2011, p. 61) I would have to say in support of
that statement that Madoff’s behavior was very unethical because of all stakeholders involved
coupled with his own motive of self-interest for profit. His ethical failure came in lying to his
customers about how they were getting their interest income. Just as Charles Ponzi did so many
years ago in the early twentieth century Bernard Madoff did from what I am calculating at least
1992 (there is no record of that) until his confession to his two sons. I believe that there were
many stakeholders, the investors for sure, but there were also his family members, his
employees, banking agencies and even the government. Madoff’s fraud was intentional which is
what makes it so unethical. I believe we could understand if money was lost from legitimate
investment, but the money he gained from these clients was used to support his legitimate
business, gain other customers and live a lavish lifestyle. He gained trust in the market for many
years in order to pull this off; I believe that is the worst of all, serving as chair of NASDAQ for
three years was one of the ways he got many people to trust him, and he used his knowledge of
the field to take advantage of many of this stakeholders that way. Madoff’s ethical issue was
intentional and that is why I believe it was so horrible for everyone affected.
Did Bernard Madoff Have Help?
I know the case study and many witnesses say that Madoff did not have any help, but I
fail to believe that a scheme can go on for over a decade with no one knowing about it. I fail to
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think that he alone transferred funds into his legitimate account without his brother and niece
knowing where this money was coming from and since they were in the rules and compliance
office there is no why they could have missed the numbers. They have to review all of their
company’s transactions at least on an annual basis and if not what were they looking at in the
company. I feel that all of his family members including his wife had to at least wonder where
the money they were spending was coming from especially when it comes to declaring company
income and what they were spending a year. You really don’t have to be an accountant to add
and subtract what you are earning from what you are living off of. I feel that many people
contributed by turning a blind eye to questionable information even early in 1999, when
questions are raised then I feel the SEC should look deeper and maybe it will take a few years,
but if they would not have been off and on with their investigations and would have been
constant they maybe could have saved investors billions of dollars. I truly believe that his son’s
maybe did not know that it was going on so long, but that they would have figured it out even if
he would not have confessed. I believe he only confessed because his son’s began to ask
questions. Madoff did have assistance even if it was people turning the other way as he swindled
people’s money.
How should we Prevent this in the Future
The show “American Greed” shows many such schemes like Madoff’s case. I believe
that there should be very strict reviews of companies investing others money. I believe the SEC,
Financial Industry Regulatory Authority, Office of the Attorney General and even FDIC should
at least review financial investment firms at least every three years and when they see as many
red flags as in this case they should review the firms annually. When they find questions in
investment practices I believe they should be publically reports so that investors have enough
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information to make informed decisions when trusting their income with investment firms.
Finally, I believe that investment firms hire and promote trustworthy, educated, caring
investment brokers. I know it’s easy to say, but they should be reviewed like doctors and
lawyers must report to the board regularly.
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References
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business ethics: ethical decision making and
cases (9th ed.). Mason: Erin Joyner.